11 Credit Card Habits You Need to Break Now

Taking control of how you use your credit card is the first step in getting out of debt. Here’s a look at 11 credit card habits you need to break immediately to start taking control of your finances.

1. Carrying a Revolving Balance

Carrying a revolving balance on your credit card makes each purchase you make more expensive thanks to interest fees. As your balance grows, interest charges accumulate, taking a big bite out of each payment you make to your account. Paying any amount of interest on your credit card account also voids any rewards you earn since the interest rate is calculated at a much higher rate than the rate at which you may earn cash back, points, or miles for your purchases.

Break this habit by treating your credit card like a debit card and only charging what you can afford to pay off in full at the time you charge it. It’s also a good idea to check in on balances once a month so you know when it’s time to scale back on spending.

2. Relying on Credit to Make Ends Meet

A recent LendingTree survey found that 64% of Americans are living paycheck-to-paycheck and many of them are relying on credit cards to make ends meet. While using credit cards to pay bills and afford other monthly expenses may seem like your only option when there’s no money left in the bank, setting up a budget can help get your finances back on track. 

Begin by creating a detailed spending plan that accounts for saving and paying down debt. Scrutinize bills for potential savings, start meal planning to reduce grocery spending, and track each purchase to ensure your dollars are going exactly where they need to so you can stay on budget. Tap into budgeting apps like YNAB or PocketGuard for help organizing your expenses and use services like Trim to identify and cancel unused services.

3. Keeping High Balances

Pushing your credit limits can cost you in the form of a poor credit score. Although the 2009 Card Act prevents credit card issuers from allowing accounts to go over their set limit so you don’t get charged an over-the-limit fee, there are other negative consequences that come with carrying a high balance such as dinging your credit score. In fact, credit utilization rate refers to how much available credit you have versus how much debt you owe. Your total indebtedness accounts for 30% of your credit score points.

In general, it’s advised that you use no more than 30% of your available credit to maintain a good credit rating. Using any more than that will impact your score for the worse and make it harder to secure a loan to buy a house or car.

4. Paying Just the Minimum Payment

Paying just the minimum due each month will trap you into a revolving cycle of debt that becomes increasingly difficult to pay off. As your balance grows and interest fees rise, you end up shelling out an incredible amount of money to pay down your original charges.

Say you’re carrying a credit card balance of $5,000 at the average interest rate of 20.74% and are only able to make a payment of $100 per month, it is estimated that it will take you 117 months (that’s almost 10 years!) to pay off the entire balance. That will cost you $6,650 in interest on top of your original purchase charges. That means you will have spent a total of $11,650 during this time.

5. Missing Payments

Pay close attention to when statement charges are due to avoid late payment fees and other potential penalties. Those who miss their payment due date will get slapped with a late payment fee of up to $41, and they will begin accruing interest on purchases charged during that billing cycle. Missing payments for 60 days or more will result in a penalty rate increase which will make your balances more difficult to pay off, leading to a vicious debt cycle. 

If you’re struggling to pay your credit card bill, don’t ignore it. Call your credit card issuer to set up a payment plan to avoid fees and penalties. Otherwise, setting up bill reminders and auto pay are easy ways to avoid these potential fees.

6. Using Multiple Credit Cards

The more credit cards you have, the easier it is to lose track of your total spending and rack up balances across multiple accounts, leading to devastating debt. It’s better to stick with one credit card so you can keep a watchful eye on spending to ensure you aren’t going over budget. This also allows you to maximize rewards to earn a greater amount of cash back, miles, or points on those daily purchases and monthly expenses.

7. Chasing Rewards

Spending more to earn rewards will cost you more in the long run compared to what you get back from the card issuer. Only use your credit card for purchases you carefully planned and use other tools to increase cash back or other reward earnings. 

8. Ignoring Bonus Reward Offers

Many reward credit cards offer bonus-earning potential each month for select retailers and businesses. These promotional offers allow you to rack up more cash back, miles, or points when making purchases with these companies, but you don’t automatically qualify for the extra perks. Such offers are usually emailed to you from your credit card company and require you to log into your account and opt-in to qualify for the extra rewards. Overlooking these promotional offers could mean you miss out on extra rewards to put toward a purchase or travel booking.

9. Swiping on Impulse

According to the Impulse Spending Report from Slickdeals, the average consumer spends just over $150 on impulse purchases each month. While $5 here and $10 there seems harmless, these small purchases quickly snowball and can cause you to take on a balance you cannot pay off by the due date. Tracking each purchase and following a carefully crafted budget is key to avoiding debt.

10. Opening Store Cards to Score a Discount

Retailers entice shoppers to open store credit cards by offering an immediate discount of 10 to 20% off their purchase if approved for an account. While the additional savings is tempting, opening a new credit card for a discount is ill-advised for a few reasons. 

First, your credit score may get dinged each time you request a new line of credit which will put a current loan request in jeopardy. Second, most store cards have low credit limits, high interest fees, and limited reward earning and redemption options, making them a poor choice for most shoppers. 

11. Ignoring Savings When Paying Down Debt

A common mistake people make when trying to get out of debt is to use all their available funds to pay down balances. However, ignoring the need to save at the same time can backfire and cause you to take on more debt down the road. While it’s important to work toward paying down high-interest debt, it’s even more important to build up savings in case of emergencies. 

An emergency fund protects your financial health by giving you a cash cushion that you can lean on during a tough financial time or when an unexpected bill pops up. Having access to liquid cash ensures you can pay bills rather than rely on a high-interest credit card and dig yourself back into a deeper debt hole. Aim to save up to three months of these living expenses in a separate account so it’s out of sight and out of mind. 

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What is a Card Verification Value?

A Card Verification Value (CVV) or Card Verification Code (CVC) is a three- or four-digit security number on a credit card used to verify that the cardholder has the physical card during online or phone transactions, providing an extra layer of fraud protection. But card issuers have developed some pretty good defenses against these ne’er-do-well thieves. One of them is that little three- or four-digit number called a Card Verification Value (CVV) — or, as some call it, the Card Verification Code (CVC). It’s your job to keep that number secret.

How Card Verification Value Works in Card Transactions

The CVV/CVC was invented to put an extra lock on your credit card and keep fraudsters at bay. It’s a secret password to ensure the rightful card owner is using the card before any money changes hands.

Enhances Online Transaction Security 

That little CVV/CVC is like a guard dog, just watching over your credit card when you go to make purchases online. And even if some no-good thieves happen to get a hold of your card number, they won’t be getting very far without that magic code. These codes are a real fence against those sneaky outlaws who might get hold of your card number but don’t have their mitts on your card itself. Without the CVV, it’s like trying to get into the corral without the gate key — it just isn’t happening!

Verifies Card-Not-Present Transactions 

When you’re making an online or phone purchase of an item, the seller asks you for the card’s CVV. It helps keep fraudsters at bay with card-not-present (CNP) purchases where you don’t physically hand over your card. The setup keeps rustlers from making off with your goods should they steal your account number but not your CVV.

Where to Find the Card Verification Value on Your Cards

It’s mighty important to know where the CVV or CVC is hiding on your card because it’s the key to keeping no-good varmints from riding off with your money. Different cards stash it in different spots, so if you’re looking to protect your funds, you’d best know where to find it.

• CVV on Visa, Mastercard, and Discover: You’ll usually find the CVV on the back of Visa, Mastercard, and Discover cards next to the signature panel. It’s a three-digit number that stands off by itself, separate from the main card number, silent but deadly against would-be hackers and fraudsters. It may be only a tiny number, but it is like the lock on a cattle gate — without it, the rustlers can’t make off with your wealth. If you aren’t paying attention to it, you might as well leave your safe wide open!

• CVV for American Express Cards: Things are a little different if you’re using an American Express card. The CVV — or,  in this case, CVV — sits on the card’s front, a four-digit number above the card number. It’s about as hard to miss as a coyote in a henhouse, and Amex likes to make sure you can find it without breaking a sweat. So, it’s a little more prominent compared to other cards. It’s as if Amex is waving a flag, saying, “Here I am!” With Amex, you look at the card front to get the code you need.

• Differences in CVV/CVC Formats: The length and placement of CVV/CVC codes depend on the card issuer. Some cards, such as Visa, Discover, and Mastercard, use only three digits, while Amex goes the extra mile with four. 

Some cards, such as virtual ones, do not even physically display a CVV. Instead, each transaction is accorded a new number. Source

Dual Pricing: Offsetting Your Processing Fees the Legal Way

Accepting credit card payments can be a double-edged sword for many small business owners – while it’s great to give your customers the option to pay with their preferred payment methods, the credit card processing fees can really add up.What if there was a way to incentivize customers to pay with cash instead, so you can avoid the fees? Well, there is! It’s called dual pricing.

What is Dual Pricing?

Dual pricing, otherwise known as cash discounting, is the practice of charging a customer less when they pay with cash instead of a credit card. It’s an increasingly popular program for businesses of all types, but you’re probably most familiar with seeing it at gas stations (where margins for the sale of gasoline are notoriously tight).

It often looks a little something like this: 

Cash discounting is a less-regulated alternative to the (heavily regulated) practice of surcharging, which presents itself as a line item on a receipt for up to 3% of the transaction total. This practice is subject to federal and state laws, and while federal law allows surcharging on credit card transactions, certain states have laws that prohibit or limit it. In a nutshell: surcharging is a markup for credit card payments, while dual pricing/cash discounting is a discount for cash payments.

As the cost of almost everything for merchants continues to increase, we’ve noticed a proliferation of “dual pricing” among small businesses. While it’s true that dual pricing (or cash discounting) is much easier to implement than surcharging, there are some rules your business should follow to avoid hefty fines and even a suspension from accepting credit card payments.

Surcharging Illegally: Common Mistakes with Dual Pricing

When we’re out and about, we’re seeing that the two most common mistakes merchants make are:

1. Changing their pricing to the cash price and then marking up the prices at the register when a customer presents a credit card.
2. Not properly informing customers of the available discount when paying in cash.

These practices look a lot like illegal surcharging.

Outside of potentially losing consumer trust, you’re putting your business at risk of penalties from your local authorities, legal action by credit card companies like Visa and Mastercard, and getting banned from accepting credit cards.

Lastly, it’s important to note that most of these mistakes originate from misinformation by merchant services providers. Whatever you’re told, make sure to do your research before implementing any cash discounting / dual pricing / surcharging programs.

Here’s how to offset the cost of processing fees with cash discounting or dual pricing while being compliant with the rules: 

• Your posted or displayed price must represent the cost of the goods if the customer pays via credit card. Alternatively, you can list both the credit card price and the cash price (dual pricing).
• You must only reduce the price at the register when your customer pays in cash, not the other way around.
• You can inform your customers of the discount opportunity with postage signage.
• Use a POS system that supports dual pricing and has a separate card price and cash price for each of your products.
• Use a reputable and licensed payment processor, like Gravity Payments.

Pro Tip: To take full advantage of cash discounting, you can raise your prices by your average credit card processing fee (say 3%) across the board, then discount the same at the register when your customer pays in cash. Source

Tap to Pay: What It Is and How It Works

Since the first plastic credit card was issued by American Express in 1959, payment tech progress has been growing exponentially. Magnetic stripe payments enjoyed a 30-year reign between the ’70s and ’90s. EMV chip card technology had a good two decades or so, beginning in the mid-’90s. And the winner of the 2010s and beyond is the NFC-powered, contactless sensation that is tap-to-pay.

Contactless payments became a must-have during COVID. Most modern card readers and payment terminals are NFC-equipped. But tap-to-pay is transcending that plastic card of the last 60+ years. NFC technology is in the midst of an evolution. Customers are driving digital advancements, and savvy small business owners should be aware of what’s to come.

History of Tap to Pay

Although contactless payments weren’t widely adopted until the 2010s, the technology actually dates back to 1995. In Seoul, South Korea, the Seoul Bus Transport Association introduced the UPass, a contactless payment card that commuters could tap on as they entered the bus. Almost ten years later, the US tried the technology, and it was four years after that when all EMV cards became NFC-equipped.

Despite the tap technology being available on most major cards, it was the smartphone advancements that really pushed consumers to adopt it. Tapping their phone to a terminal proved far more exciting than tapping the card. Google was the first, in 2011, to enable contactless payments via their mobile app. Apple Pay caught up in 2014; in 2015, the wearables market made everyone aware of the tap’s potential. Once the thought of the tap was there, the behavior followed. In 2015, many merchants switched to NFC-enabled terminals; by 2019, most banks were issuing contactless cards.

How Tap to Pay Works

Tap-to-pay, whether used with a contactless card or a smart device, operates through Near Field Communication (NFC) technology. This short-range wireless communication technology allows data exchange between devices close to each other, typically within a few centimeters.

NFC operates on radio-frequency identification (RFID) principles and electromagnetic induction, enabling communication between devices without needing physical contact or Wi-Fi connectivity.

Here’s how it works:

1.) NFC-enabled devices: The customer’s payment card (credit, debit, or mobile wallet app) and the merchant’s payment terminal must be equipped with NFC technology.

2.) Close proximity: The customer holds their NFC-enabled card or smartphone close to the merchant’s NFC-enabled terminal to make the payment.

3.) Data transmission: The NFC antennas in both devices communicate with each other. The customer’s payment information is securely stored in the NFC chip and transmitted to the merchant’s terminal.

4.) Authentication: The payment terminal validates the transaction by sending the payment details to the payment network (such as the card issuer—e.g. Visa, Mastercard, and the customer’s bank) for authorization.

5.) Secure transaction: The payment network verifies the transaction details, ensuring sufficient funds and confirming the transaction’s authenticity. A unique, one-time code is generated for that specific transaction if approved.

6.) Completion: The transaction is completed, and the customer receives a payment confirmation. The entire process is fast and secure and does not require physical contact between the card or smartphone and the payment terminal.

Benefits of Using Tap to Pay

During the pandemic, the number one benefit of contactless technology was the simple fact that it is contactless. No contact, no germs. But the benefits made known during that time were more aligned with the original reason for its development.

It’s faster

Contactless technology speeds up the payment process. Rather than “dipping” the card into the machine, merchants can quickly pass the reader close to the customer. The customer taps the card, and the transaction is complete. NFC devices facilitate the fastest and most convenient data exchange available today.

It’s secure

NFC transactions are secure due to the short distance over which they occur. Moreover, NFC devices can be secured with encryption and authentication protocols that ensure the confidentiality and integrity of the transmitted data, such as the cardholder’s personal information and card number.

It’s universally compatible

Unlike the chip card and magnetic stripe, NFC technology is standardized. This ensures compatibility between different devices and applications. Standardization enables seamless integration of NFC into more devices, including smartphones, tablets, payment cards, and other smart gadgets. It can power a payment future beyond our current plastic cards.

It’s versatile

One way to verify the longevity of a technology is to look at its usability outside of the obvious application. Businesses are using contactless loyalty cards and even loyalty apps that allow customers to store those loyalty cards digitally. Interactive marketing lets customers tap NFC-enabled promotional material to access offers, discounts, and product information. Beyond retailers and accepting payments, NFC is used for public transport, access control systems, smart advertising, data exchange between devices, and interactive gaming. NFC even enables smart packaging to provide customers with product and usage information at the point of sale.

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Why Merchants Choose CyberSource Payment Gateway Processing

Choosing the right tools to drive your business is more complicated today than it was a few years ago. The rapid evolution of consumer trends has brought a variety of innovative business solutions to market. As the ways we do business change, investment decisions carry more weight. The success and growth of your business hinges on how efficiently you innovate.

Speed and convenience are now customer expectations, no longer distinguishing businesses with the fastest ordering processing times but rather those still moving at last year’s standard. Keeping up is one thing, but staying ahead of the many moving parts of today’s economy is another. Disrupting technology can quickly turn a lucrative investment into an expense by causing unforeseen integration issues, and staying on the leading edge of business technology is vital to your success.

Single Platform Management

Efficiency is paramount to drive business growth. CyberSource, a Visa solution, provides your business with powerful resources that are simple to manage from a single platform. Say goodbye to interconnected software and the intensive task of integrating different systems.

CyberSource’s broad array of tools come into play before and after you accept payments, from order screening and fraud management through to payment processing, customer information management, and advanced reporting. To simplify reconciliation or forecast, consolidate all of your transaction reporting, or isolate it by category such as processor, payment type, geography—you be the judge.

Streamline Payments

Consumers value the convenience of paying how they want to. Whether that’s face-to-face, in-app, on your website, or over the phone, CyberSource enables a single view of customer activity across all channels. No need to funnel customers to the payment method that’s most efficient for you, as all transactions are equally easy to manage on the same platform.

Prebuilt integrations allow you to plug and play right out of the gate. Easily connect platforms such as Shopify, WooCommerce, Magento and dozens of others, as well as CRM, ERP, and other business systems. Broad compatibility with your back-end systems and other apps allows you to enhance, rather than replace, systems you have or want to have in place.

Customizable, Global Reach

CyberSource allows you to create your own checkout workflow and design, creating an experience that reflects your brand. Accept payments in 40 currencies, from over 190 countries and territories with CyberSource’s language templates to ensure every customer can easily interact with your business.

In addition to universal cards, CyberSource supports regional cards and local payment types. Payment options may be added or removed at any time. If you have global partnerships or international customers, you should never have to request an alternative transaction method for B2B and B2C transactions.

• Universal card types including Visa, MasterCard, American Express, Diners, Discover, and JCB
• Regional cards include Maestro, Carte Bancaire, CartaSi, Aura, Hipercard, and ATM/debit cards
• Support for PIN-less debit and Chinese debit cards

High volume, far-reaching business activity is no problem, as CyberSource is capable of processing transactions all the time, in real time, regardless of ordering peaks.

Mobile Payments

Mobile commerce (mCommerce) is becoming a dominant segment of the payments industry. Customers are shopping in-app, on mobile browsers, and at retail stores with tap-and-go contactless payments at an increasing rate. CyberSource enhances your business’s presence in mCommerce.

• Support for Alipay, Apple Pay, Masterpass, Samsung Pay (in-app and on the web), PayEase, PayPal, Visa Checkout, Google Pay, and more
• Ability to deploy instant checkout (account-on-file) payments without storing payment data
• PCI DSS compliant implementation that reduces your own PCI scope by not storing customer data in your environment
• One interface provides access to multiple wallets and payment types, simplifying IT maintenance and management
• Faster and easier reconciliation with consolidated reporting and transaction search capabilities

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1099-K: History and Hints

Section 6050W of the IRS tax code came with the Housing Assistance Act of 2008 (although it’s completely unrelated to housing) and introduced us to the 1099-K.

Known as the “Merchant Card and Third Party Network Payments” form, the 1099-K is an IRS effort to increase tax compliance and decrease the “tax gap,” or the difference between what people earn and what they actually report for taxes. It went into action during the 2012 tax season for 2011 income.

Payment settlement entities (PSEs), like us, are required to submit an annual 1099-K to the IRS showing, month by month, exactly how much each of our client merchants earned in electronic sales—credit, debit, stored-value cards and electronic funds transfers—over the fiscal year. PSEs also send the 1099-K to merchants (by January 31) so that they can use it to properly file their other tax forms. Before the dawn of the 1099-K, a lot of tax gaps were thought to come from small businesses accepting payments through platforms like eBay, Etsy, Amazon, ridesharing apps and other third-party sites.

Others also managed to fly under the radar with underreported, or completely unreported, sales. The 1099-K allows the IRS to tighten up the accuracy and enforcement of business taxes.

Businesses who bring in less than $20,000/year and have fewer than 200 transactions/year are exempt from the requirement and won’t receive a 1099-K.

1099-K Business Tips

Make sure you provide your payment processor with the correct Tax Identification Number (TIN), tax filing name and your legal name as the business owner. Also, be sure these match all of the information on your other tax documents. If you provide an incorrect TIN, the IRS may instate backup withholding—taking a hefty 24% of your future earnings until the federal income tax is met. If you do become subject to this backup withholding (you’ll receive what’s called a B Notice warning you of it), you can fix it by providing the correct TIN, amending your return, properly filing any returns that were missing, and paying the owed taxes. Avoid this (literally and figuratively) taxing process by double checking that your business information is up to date and consistent everywhere!

Provide your payment processor with the correct mailing address to ensure timely receipt of your 1099-K. This is particularly pertinent for ecommerce merchants who may not be tied to a physical location.

If you switched payment processors at some point during the year, be sure to include 1099-K reporting data from both of them. A business with multiple merchant accounts will need separate 1099-Ks for each. But any businesses, or branches of a business, with the same TIN use the same 1099-K.

During the year, avoid processing any personal expenses through your business’s electronic payment system. For example, say your friend owes you money and wants to pay you back with a credit card. It might be tempting to use your business’s payment terminal to take the payment. However, that money then becomes part of the 1099-K, and is taxable.

Your 1099-K shows your gross sales from electronic transactions, and does not include chargebacks or returns, so you’ll have to report adjustments under the Returns and Allowances section of your tax return. The IRS understands discrepancies between tax returns and 1099-Ks, particularly for entities like restaurants, as tips made with payment cards aren’t considered taxable income. But they will investigate large inconsistencies that seem suspicious by asking for more documentation to account for the differences, so it’s important to keep all of your transaction records handy.

1099-K requirements can either be a pain or a breeze you barely notice. To keep it the latter, the main things to remember are to keep your TIN up to date with your payment processor, file your taxes honestly, and, when in doubt, bring questions to your payment processor to avoid problems down the road. Source

How Banks Should Choose Their Next Payment Partner

Choosing the right payments partner is a critical decision for banks aiming to enhance their service offerings and customer satisfaction. A well-chosen partner can not only streamline banking operations but also significantly improve the customer experience. 

Here are key factors that banks should consider when selecting a payments partner:

1.) Expertise in Product Development: A payments partner with strong product experts ensures that the bank is always at the forefront of innovation. These experts should have a deep understanding of current market trends, regulatory compliance, and the evolving needs of both the bank and its customers.

2.) Sales Enablement and Support: The partner should provide robust sales enablement to ensure the bank's staff are well-equipped to promote and support the new services. This includes training, marketing materials, and ongoing support to help the bank maximize the adoption and utilization of new payment solutions.

3.) Exceptional Customer Service: Outstanding customer service from the partner is crucial. This means having a responsive, knowledgeable, and accessible support team that can quickly address any issues or questions that arise, both from the bank and its end customers.

4.) Diverse and Innovative Product Selection: A wide array of products allows the bank to cater to various customer needs. This range should include the latest in payment technologies, ensuring that the bank remains competitive and can offer cutting-edge solutions.

Banks looking to enhance their payment offerings should carefully consider these factors. With its strong product expertise, sales support, exceptional customer service, and diverse product offerings. Source